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Bill Would Regulate Stop-Loss Insurance Sold to Self-Insured Small Employers

Insurance Commissioner Dave Jones announced today that the California Senate Health Committee passed SB 1431, authored by Senator Kevin de Leon (D-Los Angeles), by a vote of 5 to 3. SB 1431 is sponsored by Commissioner Jones and the Department of Insurance. The bill would regulate the sale of stop-loss insurance to self-insured small employers (size 2-50) by setting minimum individual and aggregate attachment points and prohibiting exclusion of employees on the basis of health status.

"I am pleased that the Senate Health Committee has passed this important legislation which will help preserve the viability of the small group health insurance market as we move toward full implementation of the Affordable Care Act in 2014," said Commissioner Jones. "This legislation will help prevent adverse selection and the cost instability that would bring to small employers. Rather than prohibiting the sale of stop-loss insurance to small employers as some states have done, small employers in California would have the option to self-insure."

SB 1431:

Requires stop-loss carriers to offer coverage to all employees and dependents of a small employer, and prohibits the carrier from excluding any employee or dependent on the basis of actual or expected health status-related factors;

Requires stop-loss carriers to renew, at the option of the small employer, all stop-loss policies; and

Establishes minimum individual and aggregate attachment points for the sale of stop-loss insurance based on current market average attachment points. The bill contains an individual attachment point of $95,000.

Currently, 15 states regulate minimum attachment points in stop-loss policies in some fashion. Three other states prohibit the sale of stop-loss insurance to small groups, altogether (New York, Oregon and Delaware). North Carolina requires stop-loss insurers to comply with its small group insurance law.

SB 1431 is supported by the Small Business Majority, the Consumer Federation of America, Consumers Union and Blue Shield of California. The bill now heads to the Senate Appropriations Committee for consideration.

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The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $259 billion in premiums annually in California. In 2014 the California Department of Insurance received more than 175,000 calls from consumers and helped recover over $54 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.